Heating September 2010

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1 International Market Strategy Topics Czech Republic Construction of Gas Storage Tank Starts in Southern Moravia Czech Republic KORADO's Sales Down by 24% Czech Republic The Low Profit in 2009 Czech Republic VAILLANT's Profit in CZ Increased Germany CENTROTEC's Profits Raises Ireland KINGSPAN's Financial Result in 2010 Romania BAXI Increased in Sales in the First Half of 2010 Sweden NIBE Reports Improving Q2 Profit and Sales United Kingdom Boom in Solar Panel Installation United Kingdom Power Giant Close to Deal on Creating Green Fuel Factory International strategic market research and consultancy on building product and related markets

2 Czech Republic: Construction of Gas Storage Tank Starts in Southern Moravia The construction of a huge new gas storage tank with a capacity of 180 million m 3 has started at the Uranium mine Rozna in Southern Moravia. The project is estimated to cost some CZK 9 billion ( 363 million) and is to be completed in 8 to 9 years. The investor is GSCEP, a unit of CESKA PLYNARENSKA, while the construction will be managed by DIAMO, the company which operates the Rozna Uranium mine, in co-operation with the construction firm METROSTAV. The construction will employ up to 1,000 people. The country currently has 8 underground gas storage facilities, which can hold more than 3 billion m 3 of natural gas. The largest operator is RWE GAS STORAGE, a unit of dominant gas importer RWE TRANSGAS, which controls 6 of the facilities. The facilities of RWE GAS STORAGE have a combined capacity of 2.4 billion m 3 and over 35 million m 2 of natural gas could be drawn per day. RWE Gas Storage has recently obtained 35 million from the EU to expand the capacity of its storage tanks in Tranovice, Northern Moravia, and Tvrdonice, Southern Moravia. RWE Gas Storage wants to build 290 million m 3 of new storage capacity by the investment in the project is estimated at more than CZK 2.2 billion. The remaining two natural gas storage tanks are owned by the country's largest oil and gas producing company MORAVSKE NAFTOVE DOLY and SPP Bohemia. RWE GAS STORAGE expects the capacity of the natural gas storage facilities in the country to grow to 4.3 billion m 3 by 2013, which would cover about half of the current annual consumption (8.161 billion m 3 in 2009). Source: Czech Republic Today Czech Republic: KORADO's Sales Down by 24% KORADO, the largest Czech producer of radiators, saw its sales fall by 24% to CZK 1.7 billion ( 64.2 million) in The company's output as well as staff numbers decreased last year. The economic crisis affected the construction market and hereby also the radiator market. In order to cut its costs the company transferred part of its production to its subsidiary in Bulgaria. KORADO's output has been decreasing since Last year it fell by nearly one quarter and KORADO supplied fewer than 1.2 million units of products. Most of its output is sold on the domestic market. The company owns five trading subsidiaries and one production firm abroad. Source: Czech News Agency 2

3 Czech Republic: The Low Profit in 2009 STIEBELELTRONCzech Republic, who sellheating, water heatingandrenewabletechnology, hada CZK 2.17 million ( 81,900) profit in the country in 2009, down from 2008's CZK 24.4 million. The results last year were affected by a downfall in construction. The company expects the unfavourable trend in the sector to continue this year and wants to focus more on sophisticated technologies with more effective energy use. Source: ww.ctk.eu Czech Republic: VAILLANT's Profit in CZ Increased VAILLANT GROUP Czech raised profit by around 12% to CZK 27.3 million ( 1.19 million) in 2009, while its sales fell by 5%. VAILLANT was last year hit, above all, by a slump in the construction segment. However, the company registered a growth in sales of wall hung condensing boilers and solar panels despite the unfavourable development on the market. Profit grew also thanks to the programme of subsidies aimed at support of environmentally friendly heating and energy savings which was launched in This year, the development at VAILLANT will depend on how the construction industry will cope with the crisis. Source: CTK Business News Wire Germany: CENTROTEC's Profits Raises German solar thermal systems and energy-saving systems supplier CENTROTEC lifted its 2010 forecast for earnings based on its positive development in the first half of the year. In the first half of 2010 the company saw its net profit grow to 7.7 million from a loss of 9.6 million booked in the same period of Earnings before interest and tax (EBIT) increased by 70.8% on the year to 10.1 million and sales went up by 7.5% to million. Source: ADP News Renewable Energy Track 3

4 Ireland: KINGSPAN's Financial Result in 2010 Shares of KINGSPAN surged by 9% after the Irish building-materials firm posted operating profit growth for the first time in three years, helped by a recovery in U.S. and Central European markets, and forecast "robust" revenue growth in the second half. In the first half of 2010, KINGSPAN earned 20.8 million. Operating profit grew 9% to 33.1 million. Revenue inched 1% higher to 559 million despite a severe winter and after several years of decline amid the world-wide economic downturn. Source: Romania: BAXI Increased in Sales in the First Half of 2010 BAXI ROMANIA, recorded a turnover of RON 7.70 million ( 1.82 million) in the first half of 2010, up by 45% year-on-year due to a rise in the number of disconnections caused by the elimination of subsidies for heating. The company expects sales of RON 16 million, up by 15% year-on-year. During the first six months of 2010, the company sold 3,600 heating systems, boilers and solar panels. Source: Ziarul Financiar Sweden: NIBE Reports Improving Q2 Profit and Sales Swedish heat pump manufacturer NIBE has reported a SEK 111million ( million) pre-tax profit for the second quarter This compares with a SEK 93.6 million profit one year earlier. Sales grew to SEK 1.45 billion, from SEK 1.28 billion, with operating margin improving to 8.8%, from 8.0% for the second quarter Net profit rose to SEK 85.3 million, compared with SEK 67.8 million. Source: Dagens Industri 4

5 United Kingdom: Boom in Solar Panel Installation Latest figures have shown that more solar panels have been installed this month than ever before as record numbers of homeowners in the UK take advantage of the Government s renewable energy scheme. According to energy regulator OFGEM, 2,257 homes in the country have had solar panels fitted so far in August. The figure represents a significant increase from the 1,700 seen in July, and the 1,400 homes fitted in June. Around 6,688 properties had been fitted with solar panels since April. The panels are capable of generating more than 16MW of power. The Government s scheme to reward people who generate their own energy is believed to have prompted the boom in solar panels being installed. The feed-in tariff system was introduced on 1 st April, and enables homeowners to currently receive 41.3p for every unit of energy they generate, regardless of whether they use the energy themselves or sell it back to the National Grid. The tariff is paid for 25 years after the panels are installed and is increased in line with inflation. It replaces the previous system under which people could obtain grants to help cover the cost of installing the green technology. But the change to the scheme has led to a growing number of companies looking to cash in on the generous feed-in tariff. These firms are offering to install solar panels for homeowners free of charge and let them use the energy generated for free. But the company retains ownership of the panels and keeps all of the money generated from the feed-in tariff. The Energy Saving Trust said solar panels typically cost between Ç6,000 and Ç12,000 to buy. Source: 5

6 United Kingdom: Power Giant Close to Deal on Creating Green Fuel Factory The North Yorkshire power station operator wants to build the plant in Gainsborough, Lincolnshire, following the success of a smaller plant in Goole. The multi-million pound plant would create pellets from waste straw and miscanthus or elephant grass, for firing alongside coal at DRAX power station. According to planning documents submitted to West Lindsey District Council, the plant would produce 150,000 tonnes of pellets a year, made by shredding, grinding, drying and compressing straw and miscanthus. The pelleting plant and storage area would be more than 8,000 m 2, and developed by Austrian engineering group ANDRITZ, which worked on the Goole pelleting plant. It would have six grinders capable of reducing straw and miscanthus to 6mm particles. Steam and water would be added to the resulting powder which will be compressed with six presses to create 8mm pellets. Pelleting alters the density of straw from about 200kg per m 3 to about 650 kg per m 3. DRAX, which supplies around 7% of the UK's electricity, is trying to build a supply chain to meet its ambitious aims for burning biomass - organic, plant-based material. The straw and miscanthus for the new plant would be harvested from farms around Lincolnshire. DRAX believes there are about 2 million tonnes of straw available within a 50 to 70 mile radius of the power station. For some years it has been at the forefront of encouraging UK farmers and landowners to supply biomass and develop a supply chain. Last year it launched its Green Shoots plan to source energy crops from farmers. The plant has been burning biomass for seven years, but has stepped up its efforts as pressure grows to clean up Europe's coal-fired power stations. The 4,000 Mw plant recently spent Ç80 million on 400 Mw of new biomass co-firing capacity, to give it 500 Mw co-firing capability, although is not using it at full capacity because it is not economically viable. Its co-firing capacity alone, if used to its full capacity, would save about 2.5 million tonnes of carbon dioxide each year. It also has plans for three 290 Mw standalone biomass plants through a joint venture with SIEMENS, costing an estimated Ç2 billion. This would bring DRAXs biomass-burning capacity to 1,400Mw, enoughto power two millionhomes and equivalent to 2,000 wind turbines. DRAX also recently revealed plans to convert one of its 650 Mw boilers from coal to solely biomass. If the scheme goes ahead, that would make it the biggest coal-to-biomass conversion demonstration in 6

7 the world. However, the latest pelleting plant will satisfy only a fraction of DRAX biomass needs. Its aim is to source up to 1.5 million to two million tonnes of biomass a year for co-firing plus around 1.3 million tonnes a year for each of standalone plants. DRAX said plans to extend support for biomass burning are a partial victory after lobbying hard for reform to the subsidy regime. The Government recently said support for energy production using biomass will be guaranteed under the Renewables Obligation for the next 20 years. DRAX has long called for long-term support under the renewables obligation certificate scheme - the main support scheme for green technology. But the company said the government's 'grandfathering' scheme does not reach far enough and increases uncertainty on subsidies for biomass plants that are ready to operate before April Source: Yorkshire Post 7